Mark Latham Commodity Equity Intelligence Service

Friday 12th February 2016
Background Stories on www.commodityintelligence.com

News and Views:

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    Macro

    Russian, Saudi foreign ministers to meet in Munich: reports


    Russian Foreign Minister Sergei Lavrov plans to meet his Saudi Arabian opposite number on Friday on the sidelines of the Munich Security Conference, Russian news agencies quoted a source in the Russian delegation as saying.

    Russia and Saudi Arabia are backing opposing sides in the Syria conflict, and both countries are major players in international oil exports.

    http://www.reuters.com/article/russia-saudi-munich-idUSR4N15N022
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    Gold/Oil hits new record.

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    Teck Resources Profit Exceeds Analyst Estimates Amid Cost Cuts


    Teck Resources Ltd., Canada’s largest diversified miner, reported earnings that beat analysts’ estimates as costs declined and a weakening local currency helped support profitability.

    The company had a loss of C$459 million ($329 million), or 80 cents a share, compared with profit of C$129 million, or 23 cents, a year earlier, Vancouver-based Teck said Thursday in a statement. Excluding writedowns and other one-time items, the company earned 3 cents a share, compared with the 1-cent loss estimated on average by 21 analysts tracked by Bloomberg.

    Like other commodity producers, Teck has been stung by collapsing demand from China, which sent prices plunging for its main products: metallurgical coal, zinc and copper. In November, Teck said it would cut C$650 million from capital spending and costs in 2016 and eliminate a further 1,000 jobs. Costs declined across all operations in 2015 compared with a year ago, helped in part by lower oil prices, the company said.

    Teck also benefits from a stronger U.S. dollar, because most of its costs are paid in local currencies while production is priced in greenbacks. The Canadian dollar slumped 3.8 percent relative to the U.S. dollar in the fourth quarter.

    Oil Sands

    Teck took C$736 million of pretax writedowns in the quarter, including C$598 million on its stake in the Fort Hills oil-sands project in Alberta, C$45 million on its steelmaking coal assets and $93 million on copper assets.

    Sales fell to C$2.14 billion during the quarter from C$2.26 billion a year ago. That exceeded the C$1.93 billion average estimate.

    “The commodity cycle continues to provide us with a very challenging environment," Chief Executive Officer Don Lindsay said in the statement. “Our near-term priorities are to keep all of our operations cash flow positive, meet our commitment to Fort Hills with internal sources of funds, evaluate options to further strengthen our liquidity and maintain a strong financial position by ending the year without drawing on our lines of credit."

    http://www.bloomberg.com/news/articles/2016-02-11/teck-resources-profit-exceeds-analyst-estimates-amid-cost-cuts
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    Oil and Gas

    Venezuela proposes OPEC, non-OPEC producers


    Some OPEC countries are trying to achieve a consensus among the group and key non-members for an oil production "freeze", sources familiar with the discussions say, in an attempt to tackle the global glut without cutting supply.

    Top exporter Saudi Arabia might be warming to the idea, though it was too early to say whether the kingdom would give its blessing because any deal depends mainly on a commitment by Iran  to restrict its plan to boost exports, the sources said.

    The proposal of a production "freeze" at current levels was floated by Venezuelan Oil Minister Eulogio Del Pino during his tour of producing countries this month which included Russia, Iran, Qatar and Saudi Arabia, they said.

    "The Venezuelan oil minister wants to organise a meeting before OPEC's June meeting if there is consensus on either a production cut or at least a production 'freeze'," one source familiar with the matter said.

    "There is an ongoing discussion to meet soon for a freeze deal. That's what's happening now," the source said, adding that at least Russia and Qatar had given their initial agreement if there were a consensus among other producers.

    Oil prices began a slide from above $100 a barrel in mid-2014, but the Organization of the Petroleum Exporting Countries has declined to trim output without help from non-members, which so far have refused to participate.

    A production freeze could amount to a compromise in that it would limit further increases in the supply glut that sent prices to a 12-year low of $27.10 a barrel last month, while not requiring countries to cut supply and give up market share.

    Venezuela's proposal was also discussed in Riyadh during a meeting with Saudi oil minister Ali al-Naimi and Del Pino on Sunday, a second source said.

    While the idea was met with openness by Saudi Arabia, talks are still at an early stage and Riyadh will not commit unless Tehran agrees to restrict supplies, the source said.

    That appears to be a major stumbling block in the path of any agreement. A source familiar with Iranian thinking, asked whether a production freeze would gain much support in OPEC, replied that it would not.

    Iran is reluctant to restrain supply as it wants to recover the market share it lost during sanctions that were imposed in 2012 because of its nuclear programme. The sanctions were lifted in January.

    http://www.reuters.com/article/oil-opec-idUSL8N15Q37N

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    ONGC Profit Drops for Second Straight Quarter as Oil Plunges


    Oil & Natural Gas Corp. reported a second consecutive quarterly profit decline following the slump in crude prices.

    Net income at India’s biggest energy explorer fell to 12.86 billion rupees ($188 million) in the three months ended Dec. 31 from 35.7 billion rupees a year earlier, the state-owned company said in a statement Thursday. The profit missed an average estimate of 38.3 billion rupees by 27 analysts compiled by Bloomberg. Sales fell almost 2 percent to 184 billion rupees.

    ONGC took a 39.94 billion rupee impairment charge on account of the fall in crude prices.

    The explorer is tasked by Prime Minister Narendra Modi’s government with securing supplies as India targets to cut import dependence by 10 percent by 2022. The profit decline hinders the company’s aim to spend 11 trillion rupees by 2030 to add assets in India and overseas.

    http://www.bloomberg.com/news/articles/2016-02-11/ongc-profit-drops-for-second-straight-quarter-as-oil-plunges
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    Pakistan’s LNG deal with Qatar ‘cheapest’ in South Asia


    The government on Thursday said that the deal sealed with Qatar for import of Liquified Natural Gas (LNG) at the price of 4.78 dollars per mmBtu was the cheapest of its kind in South Asia.

    Prime Minister’s spokesman Dr Mussaddiq Malik at a Press conference said that the landmark deal would save the country Rs 100 billion per annum and would contribute to meeting the country’s energy needs by 25 per cent.

    He said that settled price was 13.37 per cent of the brent and was cheaper than the gas to be imported through Iran-Pakistan and Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline projects.

    He said that even India’s LNG contract was expensive by 30-35 per cent than Pakistan’s deal with Qatar.

    He mentioned that LNG would be cheaper than Pakistan’s indigenous gas. The import of gas on lower charges was almost impossible, he added.

    He said that the import of LNG from Qatar would start within 60 days.

    The spokesman said that Cabinet in 2013 had given the approval of the government-to-government deal between Pakistan and Qatar for LNG’s import.

    He said that negotiating committee comprising members of the two countries undertook 12 rounds before agreeing at the price.

    He said that Pakistan had signed the contract of non-disclosure of LNG’s price till the signing of the agreement, which was inked during Prime Minister Nawaz Sharif’s visit to Qatar on Wednesday.

    He said that the price of LNG was inter-linked with global oil prices and would increase or decrease accordingly.

    The spokesman said that Qatar LNG would cast positive impact on power generation, fertilizer production, CNG and country’s industrial sector.

    He said that country imported fertilizer valuing $265 million as gas shortage halted local production. Besides facilitating CNG sector, it would also reduce the pollution level increased by other fuels, he added.

    He said that another two LNG terminals would be established in Sindh and Gwadar and once completed, the country’s gas shortage would be overcome.

    To a question, Dr Mussaddiq Malik clarified the LNG contract had been signed between government to government having no involvement of any private company, indentor or agent.

    He reiterated that the country would overcome power crisis by 2017, though loadshedding had already been reduced both in urban and rural areas. Some power projects including Tarbella-IV, Sahiwal coal power project were nearing completion and work on several others was also in progress, he said.

    http://nation.com.pk/national/12-Feb-2016/lng-deal-with-qatar-cheapest-in-south-asia
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    Blackstone Forms Partnership for Offshore Oil & Gas Drilling Services


    Blackstone today announced that it has formed Clarion Offshore Partners LLC (“Clarion”), a new platform to provide strategic solutions to the offshore oil and gas drilling and services sector, with a financial commitment from private equity funds managed by Blackstone.

    Clarion’s investment mandate is broad and flexible, enabling the partnership to pursue opportunities with a wide array of industry participants, including offshore drilling companies, shipyards, financial institutions, investors, and oil & gas operators. The partnership will provide creative financing solutions including growth and restructuring capital to the sector.

    The Clarion team is led by senior executives with extensive experience in the offshore drilling services sector and has operated in virtually every offshore basin in the world. Clarion’s Chairman Louis Raspino, together with partners Greg Looser, Kevin Robert, and Ron Toufeeq, were the majority of the executive management team at Pride International. Under the leadership of Mr. Raspino as Chief Executive Officer, with Mr. Toufeeq as Chief Operating Officer, Mr. Robert as Chief Commercial Officer and Head of Business Development, and Mr. Looser as Chief Administrative Officer and General Counsel, Pride International restructured its balance sheet, rebuilt its worldwide management team and infrastructure, and executed asset rationalizations. These efforts established Pride as a leading international offshore drilling company with a heavy emphasis on investment in deepwater growth.

    Louis Raspino said, “This is an opportune time in the industry for a well-capitalized and experienced team to provide creative financing and operational solutions. Balance sheets are under severe pressure, existing operators are challenged to deploy assets, and related parties throughout the value chain are also facing financial pressures. We believe Clarion can be a partner of choice to the industry and we are excited about partnering with Blackstone.”

    http://www.businesswire.com/news/home/20160211005756/en/Blackstone-Forms-Partnership-Offshore-Oil-Gas-Drilling

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    Canadian Regulator Sees Petronas Project Harming Environment


    The Canadian regulator reviewing a natural gas export project on the nation’s Pacific Coast said the C$36 billion ($26 billion) development led by Petroliam Nasional Bhd. would probably cause “significant adverse environmental effects.”

    The Canadian Environmental Assessment Agency released on Wednesday the draft of a report that’ll be reviewed by the government before it makes a decision on the liquefied natural gas proposal. The agency raised concerns about greenhouse gas emissions and the destruction of harbor porpoise habitat, even with mitigation measures, and said the development probably wouldn’t significantly harm the environment in other ways. It added 20 pages of conditions for the project to move ahead, should the federal government give its approval.

    Canada’s environment minister will have the final say on whether the Pacific NorthWest LNG project led by Petronas, as the Malaysian company is known, can proceed. The proposal is coming under new policies announced by Prime Minister Justin Trudeau’s Liberal government last month, including more consultation and an assessment of the carbon emissions tied to the facility and gas-field drilling. Trudeau has promised to overhaul resource project reviews to overcome environmental opposition.

    “It is likely the Canadian federal government will approve the project subject to achievable conditions," David Austin, associate counsel at Clark Wilson LLP in Vancouver, said in an e-mail. "But considerably more effort is going to have to be put into reducing greenhouse gas emissions from the pipelines and natural gas fields that would supply it.”

    The proposal, also backed by Indian Oil Corp., Japan Petroleum Exploration Co., China Petroleum & Chemical Corp. and Brunei National Petroleum Co., was cleared by the report for not being likely to cause significant harm to marine fish and fish habitat. Environmental opponents to the project and an aboriginal community with traditional lands at the shipping terminal site, the Lax Kw’alaams Band, had raised concerns about the potential for the development to destroy important salmon rearing habitat.

    The regulator was most focused on carbon emissions.

    http://www.bloomberg.com/news/articles/2016-02-11/canadian-regulator-sees-petronas-gas-project-harming-environment

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    Iran, Brazil in talks on investment in Brazil refineries -source


    Iran and Brazil are in talks about a possible Iranian investment in troubled refinery projects controlled by Brazilian state-led oil company Petroleo Brasileiro SA, a Brazilian government source told Reuters on Thursday.

    Iran, which is boosting oil output after the end of sanctions over its nuclear program, is interested in exporting oil to Brazil, processing that crude at refineries in Brazil's northeastern region and then selling it in the Brazilian market, the source said, adding that talks are at an early stage.

    Talks though are far from any result, the source added.

    "For this subject to be considered embryonic it will still need to evolve a lot," said the source, who asked for anonymity because the inter-government talks are private.

    Iran has shown interest in investing in the construction of the Premium I and Premium II refineries in Brazil's northeastern states of Maranhao and Ceara, the source said. The refineries are designed to produce low-sulfur fuels.

    While plans for those projects were developed by Petrobras, as the state-owned oil company is known, they have been dropped from its investment plan. The source was not clear if any Iranian investment would include Petrobras.

    Battered by financial problems, a corruption scandal and falling oil prices, Petrobras suspended work on both projects. Each is expected to cost more than $15 billion.

    To help reduce its debt of abut $130 billion, Petrobras plans to sell $15.1 billion of assets by the end of this year and it has long said it has been seeking partners for its refinery assets.

    Earlier on Thursday, Brazilian Mines and Energy Minister Eduardo Braga said Brazil "is in talks with the Iranians about the question of refineries in Brazil" but he declined to give details.

    Petrobras declined to comment on the possibility of Iranian investment in Brazilian refineries.

    http://www.reuters.com/article/brazil-iran-refineries-idUSL2N15Q38N
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    EOG CEO: Industry wary of false start on oil recovery


    The energy sector won’t repeat last year’s mistake of rapidly boosting production the next time the price of oil hits $60 a barrel, said the chairman and CEO of EOG Resources.

    When the price of the benchmark for U.S. oil seemingly stabilized near $60 a barrel last May, the number of rigs drilling for oil increased. But the price of oil cratered in July, triggering a free fall that may still not have bottomed out. 

    “We’re not going to be ramping up production the first time oil hits $60 a barrel,” EOG CEO Bill Thomas said Wednesday at the NAPE Summit 2016 in Houston.

    The U.S. shale oil industry doesn’t want to drive down the price by oil by overreacting, he said. “We’re not going to try that again.”

    That’s the case even though a lot of EOG’s wells in the Eagle Ford and Permian Basin are profitable near $45 a barrel, he said. Last year, EOG had a “zero” growth goal after previously surging about 40 percent a year.

    However, Thomas emphasized the future of U.S. shale oil is bright as early as 2017 with global demand still increasing and U.S. companies constantly advancing technologies and efficiencies.

    “U.S. horizontal oil is going to be critical to grow to supply global demand growth,” he said, arguing that most of the world’s future oil supply will come from the Middle East and the U.S.

    Houston-based EOG touts itself as the the largest producer of oil in the onshore lower 48 states.

    “We don’t plan on giving up that lead. We have big plans going forward,” Thomas said.

    “There’s no better time to pick up acreage when the industry is at a low point,” he added.

    While he admitted a “bit of disappointment” that overall U.S. oil production didn’t decline more last year, Thomas said he expects sharper cutbacks this year with most producers cutting their capital expenditures at least 40 percent. “U.S. production is really going to fall quite substantially,” he said.

    It’s a lot harder to get oil out of shale rock formations than it is to extract natural gas, Thomas said, so the nation isn’t going to see a seemingly endless over-supply of oil that keeps prices deflated.

    “I think the future of the business is obviously going to be a lot more discriminatory,” he said, and the companies with the best assets will thrive. As such, EOG is positioned with wells that are twice as productive as the industry average, he said.

    While Thomas isn’t predicting $70 oil, he expects the eventual rebound.

    “Nobody believes that current prices are sustainable,” he said. “Everyone is stressed. I don’t care who you are. Even the Saudis are stressed.”

    The problem for now is the U.S. shale industry doesn’t respond quickly enough to serve as the world’s swing producer, he said, and Saudi Arabia is refusing to take that role. As such, there is no so-called swing producer to keep supply and demand in balance and the market is depressed. American oilfield services companies will need time to hire employees after massive layoffs, he said.

    At NAPE, Texas Railroad Commissioner Christi Craddick said Saudi Arabia is “not very happy” with Texas because so much of the shale oil boom has occurred in Texas’s Eagle Ford and Permian Basin.

    Despite the oil downturn, the energy sector is a huge part of Texas’ economy. She said the energy sector represents about 37 percent of the state economy, although that’s down from 41 percent 18 months ago.

    “We’ve seen these ups and downs, so nobody panic,” Craddick said.

    http://fuelfix.com/blog/2016/02/10/eog-ceo-industry-wary-of-false-start-on-oil-recovery/

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    Cenovus Energy again cuts dividend, 2016 budget and jobs


    Oil producer Cenovus Energy Inc (CVE.TO) posted a bigger-than-expected quarterly loss and announced a fresh round of cuts to its quarterly dividend, 2016 capital budget and workforce, as it tries to shore up finances amid an incessant fall in oil prices.

    The Canadian company, which has been cutting costs in response to a more than 70 percent fall in oil prices since June 2014, said it would lower spending at its Foster Creek and Christina Lake oil sands projects in Alberta, which its operates along with ConocoPhillips (COP.N).

    Alberta's vast oil sand deposits are the world's third-largest crude reserves, but are more expensive to operate in than conventional oil fields.

    "Capital discipline and balance sheet strength will remain our top priorities in this extremely challenging oil price environment," Chief Executive Brian Ferguson said in a statement on Thursday.

    Cenovus cut its 2016 capital spending for the second time, this time by C$200-C$300 million to C$1.2-C$1.3 billion, and said it also plans to reduce spending on its emerging oil sands assets and its conventional oil business.

    However, the company said the planned capital spending reductions would have "minimal impact" on its oilsands production, which it expects to stay within its previous forecast of 144,000-157,000 barrels per day on a net basis.

    Cenovus sold its oil and gas royalty properties to Ontario Teachers' Pension Plan for about C$3.3 billion last year to strengthen its balance sheet and create flexibility to invest in growth projects.

    The company said on Thursday it plans to further reduce its workforce, on top of a 24 percent reduction last year. It did not say how many employees would be affected in the latest round of job cuts.

    Cenovus, which had cut its dividend by 40 percent in 2015, said it would slash its current-quarter dividend by 69 percent to 5 Canadian cents per share.

    The company also plans to cut operating, general and administrative costs, including for its workforce, by C$200 million.

    Cenovus's net loss widened to C$641 million ($458.4 million), or 77 Canadian cents per share, in the fourth quarter ended Dec. 31, from C$472 million, or 62 Canadian cents per share, a year earlier.

    Operating loss, which excludes most one-time items, fell by more than a quarter to C$438 million, or 53 Canadian cents per share.

    Analyst on average were expecting a loss of 20 Canadian cents per share, according to Thomson Reuters I/B/E/S.

    http://www.reuters.com/article/us-cenovus-energy-results-idUSKCN0VK10M
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    Precision Drilling suspends dividend, raises 2016 capex budget


    Canadian rig contractor Precision Drilling Corp suspended its dividend payments as demand for its onshore rigs weakened due to a slump in oil prices.

    The company also raised its capital spending budget for 2016 by about 12 percent to C$202 million ($144.4 million), partly due to a weak Canadian dollar.

    Crude prices have slumped nearly 70 percent since June 2014, leading to oil and gas producers cutting spending and scaling back drilling, forcing rig contractors to idle or even scrap rigs.

    "There is limited visibility with few positive market signals," Precision's Chief Executive Kevin Neveu said in a statement on Thursday.

    The company's net loss widened to C$271 million, or 93 Canadian cents per share, in the fourth quarter from C$114.0 million, or 39 Canadian cents per share, a year earlier.

    Revenue fell about 44 percent to C$345 million.

    http://www.reuters.com/article/precision-drill-results-idUSL3N15Q263

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    Pennsylvania governor formally proposes natural gas severance tax


    Saying it is essential to help Pennsylvania address a serious public schools funding shortfall, Gov. Tom Wolf (D) formally asked state legislators to enact a 4.7¢/Mcf natural gas severance tax. The levy would generate more than $1 billion in revenue prior to exemptions, he said in a Feb. 11 policy memorandum to legislators.

    Oil and gas groups in the commonwealth anticipated the governor’s move. Officials from the Pennsylvania Independent Oil and Gas Association and API-PA, a division of the American Petroleum Institute, each said on Feb. 9 that a severance tax on gas produced in Pennsylvania would be a bad idea.

    Wolf has previously suggested that a gas severance tax would be an effective way to address $1 billion of Pennsylvania public education funding cuts in recent years. The proposal is modeled on West Virginia’s similar tax, he said in his Feb. 11 memorandum.

    “In addition, this approach has the benefit of being field tested,” he told the legislators. “West Virginia offers proof that a state can build a thriving unconventional natural gas industry while simultaneously using a portion of the proceeds to help make a better future for its citizens.”

    The 5% severance tax on both conventional and unconventional gas production would not be in addition to Pennsylvania’s existing impact fee, the governor emphasized. “My proposal would continue the payments made to communities impacted by drilling that are currently funded by the impact fee,” he said.

    Exemptions would be allowed for gas given away for free, gas from low producing wells, and gas from wells brought back into production after not having produced marketable quantities, Wolf said.

    Citing the governor’s statement budget address that “Pennsylvania’s businesses do not have the luxury of pretending that problems don’t exist,” PIOGA Pres. Lou D’Amico said that day: "No industry in the commonwealth is more aware of this fact than natural gas producers and their service companies, which are dealing with a long-term commodity price crisis and new state regulations that will unnecessarily drive up the cost to produce energy in this state.”

    Wolf’s proposal for a gas production severance tax, which would come on top of poor market conditions and regulatory burdens, is simply an effort to punish Pennsylvania’s oil and gas producers, he continued. “If enacted, it will put people out of work, drive more businesses into bankruptcy, reduce energy production and result in less net-tax revenue to the state,” D’Amico warned.

    http://www.ogj.com/articles/2016/02/pennsylvania-governor-formally-proposes-natural-gas-severance-tax.html
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    TransCanada falls to a loss after $2.1 billion charge on Keystone XL


    TransCanada announced Thursday it had booked a C$2.9 billion or US $2.1 billion charge related to its now-rejected Keystone XL pipeline in the fourth quarter of 2015.

    The after-tax, non-cash impairment came in at the upper range of the C$2.5 billion to C$2.9 billion charge the company previously said it expected to take on the C$4.3 billion – US$3.1 billion – carrying value of the Keystone XL and its related projects.

    The impairment pushed the Calgary-based energy logistics company to a C$2.5 billion or US$1.7 billion loss on the quarter, compared to net income of C$458 million or US$328 million for the same period in 2014.

    Measured by distributable cash flow, an industry standard metric that approximates the amount of cash available the company has on hand to pay dividends, TransCanada generated distributable cash flow of C$778 million or US$556 million. The company said it generated C$1.10 per share in the final quarter of 2015 and planned to pay out a dividend of C$0.565 per common share for the quarter ending March 31, 2016, up 9 percent from the previous quarter.

    The Keystone XL pipeline was the planned cross-border link in TransCanada’s pipeline route running from Alberta’s oil sands to the refineries of the Gulf Coast. While other pipelines along the route were built, theU.S. denied the Keystone XL a key permit late last year, effectively halting the lines progress. TransCanada has launched legal action to revive the pipeline.

    The impairment on the Keystone XL included the projects linked to it, such as the oil storage terminal at the line’s planned origin point of Hardisty.

    “The impairment charge was based on the excess of the carrying value over the fair value of C$621 million, which includes a C$93 million fair value for Keystone Hardisty Terminal. The Keystone Hardisty Terminal remains on hold with an estimated in-service date to be driven by market need,” TransCanada said in a statement accompanying its earnings announcement.

    On Jan. 6, TransCanada said it would initiate a claim under Chapter 11 of the North American Free Trade Agreement against the U.S. arguing that the denial was arbitrary and unjustified. The company is seeking to recover more than US$15 billion in costs and damages.

    http://fuelfix.com/blog/2016/02/11/transcanada-falls-to-a-loss-after-2-1-billion-charge-on-keystone-xl/?utm_source=twitterfeed&utm_medium=twitter

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    Alternative Energy

    SunEdison is being sued by Latin America Power Holding B.V.


    Solar firm SunEdison is getting punished for the second day in a row.

    The stock is down 10% on the news that the company is being sued by Latin America Power Holding B.V. for not completing a $733 million buyout, according to the WSJ.

    LAPH shareholders want a New York judge to freeze $150 million of the company's assets.

    From WSJ:

    In court papers filed in New York Supreme Court Wednesday, the Latin America Power investors say SunEdison, which has suffered a “stunning financial collapse” in its stock price, is “teetering on the edge of bankruptcy,” and has allegedly said it would transfer assets away.

    This is the last thing SunEdison needs. The stock started falling in July, when its attempt to acquire solar firm Vivint revealed to investors that the company may not have as much cash as they thought. The stock has fallen 90% in a year.

    SunEdison is also dealing with legal action brought by billionaire investor David Tepper, of Appaloosa Managment. He has a stake in TerraForm Power, one of two of SunEdison's sister company's called yieldcos. Yieldcos act as utilities that manage and collect fees from the projects SunEdison builds.

    According to Tepper, the Vivint deal would force TerraForm Power to purchase low grade assets.

    http://uk.businessinsider.com/sunedison-sued-by-latin-america-power-2016-2?r=US&IR=T
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    German power provider to use electric cars to stabilise the grid


    German green power provider Lichtblick has announced plans to incentivize the charging of electric vehicles at times of low power demand. In doing so, the firm also explains why this is not already happening.

    The idea is pretty straightforward: store power in batteries at night, when wind power production can be fairly high but demand is always at its lowest. Otherwise, people will come home from work and a plug in their cars around 6 or 7 PM, when power demand peaks. If that happens, electric mobility will destabilize the grid.

    Simple time-of-day rates would solve the problem, but German utilities don’t always offer them. And there is no requirement for owners of electric vehicles to have them (there probably should be).

    Now, Lichtblick aims to avail itself of an option in Section 14 a of the German Energy Management Act, which specifies that electric vehicles, heat pumps, and overnight electric heating systems can all function as “controllable consumption equipment.” In that case, the grid fee is reduced.

    The power provider estimates that a household’s power rate could be 30 percent lower in such cases, and the cost of charging electric vehicle could drop by “up to 200 euros annually.” According to the press release (in German), the project is currently being rolled out with “a number of test customers,” who will be able to charge their cars at lower rates between 9 PM and 6 PM.

    The business model is, however, still a blunt instrument; it does not truly reflect whether excess power is available or not. If the wind is not blowing at night, you still get the incentive, and if a record level of solar power is generated around noon time on a weekend (when demand is low), you have no incentive to charge. Germany still cannot get its head around truly flexible time-of-day rates. The mere mention of retail smart metering draws protest about data privacy.

    If the option exists in the law, why hasn’t anyone done this before? The answer is perhaps the most interesting part of the story. Lichtblick says the law does not specify rules for such agreements between power providers and grid operators.

    In practice, an energy provider like Lichtblick would have to negotiate complex agreements with each of the almost 900 distribution grid operators in the country towards offering inexpensive electricity for electric cars at private charging stations,” the press release explains, adding that “the tremendous amount of work involved would outweigh the cost savings.”

    Germany is now considering upfront purchase price bonuses for electric vehicles, a policy that is pursued in numerous other countries as well, but the German public and numerous German experts remain critical of the policy, pointing out that only the rich would benefit from the bonus as long as electric cars cost twice as much as the new vehicles most people can afford. Furthermore, electric cars are still cars; true progress will come from walkable cities with excellent bike paths.

    http://reneweconomy.com.au/2016/70354

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    Agriculture

    Mosaic results, looks for bargain buys as fertilizer sector slumps


    U.S. fertilizer company Mosaic Co (MOS.N), grappling with falling prices and profits, is looking for acquisitions that could be bargain-priced in a weak commodity sector.

    The world's largest producer of finished phosphate products on Thursday forecast lower selling prices for potash and phosphate in the current quarter. The Plymouth, Minnesota-based company also reported fourth-quarter profit that fell less than expected, and announced a $75 million share repurchase program.

    Chief Executive Joc O'Rourke said the company is interested in acquisitions related to either potash or phosphate, but would weigh any opportunities against the benefits of further repurchases of its stock, which has fallen about 50 percent over the past year.

    "The down parts of the (commodity) cycle do present opportunities," Chief Financial Officer Rich Mack said on a call with analysts. "If there is something that is extraordinarily compelling, it's something that we could act on."

    Fertilizer producers' profits have been hit by falling prices, largely due to weak currencies in countries such as Brazil and low grain prices. Falling currency values against the U.S. dollar have lowered production costs 17 percent in Canada, where Mosaic's largest potash mines are located, but the savings amount to 41 percent in Belarus, where potash rival Belaruskali operates, Mosaic said.

    It expects phosphate prices to fall as much as 14.6 percent to $350 per ton in the current quarter and potash prices to fall as much as 21 percent.

    Mosaic forecast global phosphate shipments in 2016 of 65 million to 67 million tonnes, up from 64.4 million last year, according to BMO Nesbitt Burns. Potash shipments look slightly lower this year at 58 million to 60 million tonnes, down from 60.7 million in 2015.

    The company said last week that it would cut output of phosphates by up to 400,000 tonnes in the first quarter, due to weak demand.

    Adjusted earnings per share was 53 cents, compared with average analysts' estimates of 44 cents per share, according to Thomson Reuters I/B/E/S.

    Fourth-quarter net earnings fell to $155 million, or 44 cents per share, in the fourth quarter ended Dec. 31, from $360.7 million, or 97 cents per share, a year earlier.

    Net sales fell 9 percent to $2.16 billion.

    http://www.reuters.com/article/us-mosaic-results-idUSKCN0VK13E
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    Base Metals

    Olympic Dam to beat 2016 copper target – BHP


    Mining major BHP Billiton is on track to exceed its 2016 financial year copper production target of 200 000 t at the Olympic Dam mine, in South Australia. 

    Asset president Jacqui McGill told the American Chamber of Commerce on Friday that copper production during the December quarter had increased by 37%, compared with the previous corresponding period, to a record 112 000 t. “The grade of our copper ore has also increased by 35% in the December 2015 quarter, which is in line with the mine plan. “Again, this is an important point to note; we are now regularly delivering production that meets our plans, which has not happened consistently for some time.” McGill noted that the changes at the Olympic Dam operations were necessary, given the position the mine was in only a year ago. 

    “The mood was sombre, and the site wasn’t operating at full capacity due to a failure our of Svedala mill, which is an important part of our production process. Our teams were disengaged, we weren’t profitable and we had a bleak outlook.” “We needed to act to secure the future of Olympic Dam, and that meant drastic action.”

    The “drastic action” included changes to the underground mine, which reduced risk to miners, and a restructure in the organisational structure in the mine, which led to 550 redundancies. During this time, the mine operated at full capacity, which McGill said enabled BHP to build inventory, while the miner also took the opportunity to do significant maintenance on the surface plant. 

    McGill noted that with all of these changes implemented, and copper production forecast seemingly sunny, BHP was also continuing to target a position in the first segment of the cost curve. “This is incredibly important as we operate in a global market and must be competitive on that basis, not simply within Australia. 

    We’ll push towards this through low-risk, capital-efficient underground expansions, including accessing the Southern mine area.” McGill said that over the next five years, BHP would construct about 120 km of new tunnels at Olympic Dam, while working to reset its cost base through higher volumes and greater efficiencies, reducing unit cash costs by 34% in 2016 and by 48% in 2017, taking unit costs to $1/lb.

    http://www.miningweekly.com/article/olympic-dam-to-beat-2016-copper-target-bhp-2016-02-12
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    Steel, Iron Ore and Coal

    Queensland’s January coal exports at record


    Despite the falling commodity prices, Queensland coal exports during the month of January reached just over 19-million tonnes, which was a record for the month of January and an 8% improvement on the same period last year. 

    Queensland Resources Council (QRC) CEO Michael Roche said on Friday that the coal ports of Abbot Point, Dalrymple Bay, Hay Point and Gladstone all had their strongest ever January. “The latest export figures for January signify that Queensland regions are also the heavy lifters when it comes to royalty contributions. 

    The Queensland government will receive royalties on those 19-million tonnes, even though one in every three Queensland coal mines is operating at a loss. “It also illustrates that demand from Asia for Queensland’s high energy value, lower-emission coking and thermal coal remains strong.” Roche said that the Queensland coal industry’s ability to maintain this strong export performance was not unlimited, especially for those mines running at a loss. 

    “Some mines remain open only because their high fixed costs (for example rail and port charges) mean that, if they were to close, the losses could be even greater. This higher production allows mines to spread their fixed costs over more tonnes.” He added that if the Queensland government wanted to see this strong export performance and flow of royalties continue, it needed to work with industry on a comprehensive plan to deliver some breathing space.

     “In the absence of such a plan, our fear is that more mines will be forced to close.” The QRC earlier this week revealed that the Queensland resource sector employment fell by about 21 000 in the past two years, while nearly one-third of the state’s coal miners were operating at a loss in the current economic environment.

    http://www.miningweekly.com/article/queenslands-january-coal-exports-at-record-2016-02-12
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    Brazil court freezes Vale, BHP, Samarco assets -report


     A judge in Brazil's state of Minas Gerais has frozen 470 million reais ($118 million) of assets owned by Vale SA and 1.8 million reais linked to BHP Billiton Ltd to ensure payment of damages related to a deadly dam rupture, Rio de Janeiro's O Globo newspaper said on Thursday.

    A tailings dam at Samarco Mineração SA's main iron ore mine burst in early November, unleashing a tsunami of mud and toxic sludge that killed at least 17, left 800 homeless and triggered what the federal government has called Brazil's worst-ever environmental disaster.

    BHP and Vale are 50-50 joint venture partners in the miner in Brazil's Minas Gerais state.

    The order to freeze the money was granted after a request from a public prosecutors in Barra Longa, Minas Gerais, O Globo reported in the Lauro Jardim column on its website.

    There has been growing frustration over delays in providing compensation or repairing damage to those affected by the disaster. In December another Brazilian court froze an unspecified amount of Vale and BHP assets after determining that Samarco did not have enough cash to pay for the damage alone.

    Brazil's federal government and two state governments are suing Samarco, Vale and BHP for 20 billion reais ($5 billion) over the disaster.

    Vale's press office said they will appeal the ruling.

    http://www.reuters.com/article/brazil-damburst-vale-sa-bhp-billiton-ltd-idUSL2N15Q385
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    Rio Tinto pushes ahead with Guinea megamine despite writedown


    Rio Tinto will seek financing for its massive Simandou iron-ore project in Guinea, despite writing down its value due to low commodity prices and funding uncertainties. The world's No. 2 miner on Thursday reported a net loss of $866-million last year, hammered in large part by a $1.1-billion writedown of the $20-billion Simandou project, considered the world's biggest untapped iron-ore deposit.

    But Rio Tinto, investors and advisers said this would not impede the hunt for funding or the timing of the project, which could have a major impact on Guinea's flagging economy. "This is just an accounting adjustment," said Rio Tinto's Alan Davies, president of the Simandou project. "Today's decision has no impact on the timing of the project." Simandou comprises an iron-ore mine in central Guinea, a 650 km (404 mile) railway and a deepwater port on the West African country's Atlantic Coast. 

    Its development already involves a number of international investors and developers. At full production, expected at around 100-million tonnes of iron-ore a year, Rio said the project will generate about $7.5-billion in revenues, according to a 2014 report. It would add $5.6-billion to Guinea's GDP, Rio said, making Guinea the fastest growing economy in the world. 

    Guinean President Alpha Conde is relying on the project as a boost for Guinea's finances. "The value of Simandou makes it an essential opportunity for investors," Guinea's ministry of mines and geology said in a statement. "The Guinean Government is fully confident in the success of the project." 

    Everything now depends on funding for the project, whose economics are less certain now that commodity prices are in a trough. Iron-ore prices are near multiyear lows, knocked by waning demand in China and a market glut. Rio said it will present a feasibility study in May, outlining the cost of the project and investors will then make a decision. Until then, the timing of the venture is unclear.

    http://www.miningweekly.com/article/rio-tinto-pushes-ahead-with-guinea-megamine-despite-writedown-2016-02-12

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    Outokumpu plans cost cuts to stem losses


    Outokumpu, the Europe's largest stainless steel maker, on Thursday posted an underlying loss from the fourth quarter and forecast more losses in the first quarter, adding it aims to improve profitability with new cost cuts.

    Outokumpu, 26 percent owned by the Finnish state, has suffered as a steep drop in the price of nickel, an ingredient in stainless steel, has made distributors hold back orders, while production problems have also harmed the business.

    The fourth-quarter underlying operating loss was 11 million euros ($12 million), compared to analysts' average expectation of a loss of 38 million euros in Reuters poll.

    Outokumpu said it estimated first-quarter delivery volumes to be flat compared to the fourth quarter, and its core operating result to remain negative.

    "On an immediate term, we will take swift and precise measures... The scale, details and time frame for the savings and working capital reduction will be communicated in the next couple of months," Roeland Baan, who started as the new chief executive of the company in January, said in a statement.

    "Their capacity utilisation rate seems to be improving in Calvert (U.S. mill), and I think the underlying market demand in Europe has not deteriorated... It is also good that they see the need for internal action," said Nordea analyst Johannes Grasberger, who has a 'buy' rating on the stock.

    http://www.reuters.com/article/outokumpu-results-idUSL8N15Q2SR

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